The regulator is investigating whether financial entities are investing in hedge funds in order to share inside information.
The Securities and Exchange Commission is investigating whether financial entities are investing in hedge funds in order to share inside information, Reuters reported today.
For the past few months, the SEC has increased probes of hedge funds in an attempt to ease public concerns that banks or others are investing in hedge funds to gain access to investors’ information, and now the Commission investigating further by looking into an underground flow of inside information, Reuters reported.
Hedge fund managers have a confidentiality obligation, a lawyer told Reuters, so if employees share client information with contacts and they trade on it, the action is insider trading.
Sharing information about investors’ strategies could move stock prices, and the SEC told Reuters that it maintains ongoing investigations into inside information sharing between hedge funds and banks, brokers, or other public companies associated with hedge fund management companies.
The SEC’s investigations into the $1.9 trillion industry involve insider trading, faulty asset valuation, and conflicts of interest, among others, according to Reuters.